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Profiling Facebook: The Google of Social Networking (Part III)

Posted in Revenues and Monetization, Social context, media and advertising by Manas Ganguly on March 17, 2009

This is the last of the Profiling facebook series. The earlier posts have been listed above. The first post dealt with the rise of Facebook and its business model, the second part dealt with Mark Zuckerberg’s vision for Facebook. This post is a critique of the Facebook’s success in terms of efforts @ monetization of Social Networking Freetardonomics.
Fortune featured Facebook in an article “How Facebook is taking over our lives” in February 2009. Read the story. The focus was on the growth in Facebook users and race to mass market (Graphic below), stickiness, user demographics, Zuckerberg’s vision and applications that make Facebook a very happening place! 


Here is Paul Monica, (editor in chief of CNN money) critique of Facebook published as “Why i hate Facebook“.

Reason 1: It is not always about Networking. There are times when people like to be un-networked.

Reason 2: With 175 million users and growing at 6 million per month, the top line sounds great. But How do you generate meaningful revenue and profits out of such a venture/user base. Popularity @ Freetardonomics is fine, but profits are cooler!

Reason 3: The first 150 million users accrued to the following in the stated number of years.
Telephone: 89 years
Television: 38 years
Cellphone: 14 years
iPod: 7 years
Facebook: 5 years
This rationale has a strong fallacy: Apple sold a product to 150 million consumers, a pretty pricey one at that where as all Facebook has done is to get people signed up for a service: a free one at that. A comment worth a mention in here is “Bill Gates did not become one of the wealthiest men on the planet by giving away operating systems for free!”

Reason 4: Social networking is about easily connecting and communicating with friends. Ads and promos wouldnot mean much to the user who is “blind” to all that the web site offers since he is single mindedly networking. Thus the inherently loose one here is that Social Websites can never be major generators of Ad revenue.

Reason 5: Efforts to tap information about users implicitely can invite legal backlash as it did with the Beacon@Facebook. This furthermore narrows the field for targetting users with relevant marketing stuff.

Reason 6: 2009 and 2010 would possibly be the toughest years in US and marketers will cut costs. Online advertising will slow down from 17,5% in 2008 to 8.9%. Facebook’s attempts at Traditional online advertising has failed miserably and revenue from banner ads are small enough to ignore them as incidentals.

There are the examples of AOL and Yahoo who after a brilliant start fizzled out in trying to monetize their offerings on the web. Facebook and its team must now deliver on a telling agenda of monetizing their growth on a difficult wicket of the economic meltdown.

Of Mobile Wallets and Mobile Payments

Posted in Industry updates, Value added services and applications by Manas Ganguly on March 17, 2009

Wallet phones are mobile phones equiped to include bank cards, credit cards, house keys, company access control IDs, electronic cash, train tickets and many more functions. Wallet phones in principle can take over all functions which our wallet has.Wallet phones enable mobile operators to enter new industries, especially the payment and credit card industries. For this reason wallet phones represent innovation and disruption for established industries, such as credit cards.

Payments through mobile phones is a fundamental shift of paradigm occuring in the wireless communication industry. It originated in Japan. Due to declining ARPU Japanese mobile operators are creating new streams of income independent of voice or data traffic. This paradigm shift led DoCoMo to invest in financial institutions, create a credit brand, and make a series of other investments including brick-and-mortar business, while competing operators follow different strategies.
The NFC (near Field Communications) technology has been there on the horizon for sometime now. Currently, local mPayment transactions, also known as proximity mPayments or Near Field Communication (NFC), do not have much scope as only 1 percent of mobiles sold in 2008 were allegedly NFC-enabled and there is no widespread, popular recipient technology to complete an NFC payment. NFC is a technology that enables devices to wirelessly exchange data without physical contact within a range of 4 inches. It eliminates the need for all types of plastic transaction cards and, therefore, contributes towards saving the environment. It works in the 13.56 MHz radio frequency band, has a bandwidth of 2 MHz and can support 848 kbits per second exchange of data.
However, 2008 turned out to be the first big year of reckoning. In 2008, approximately $72 billion mobile initiated business was accrued via an estimated 25 billion transactions made by nearly 40 million consumers, which included roughly $24 billion for purchasing games, music and ringtones. 18% of US households wired to the internet have made sometype of mobile payment in 2008 including online bill payment, money transfers to individuals, online loan payments and online purchases. 

A new analysis by Juniper Research in mobile payments opportunity forecasts that, by 2013, the figures could jump exponentially to $860 billion generated made by close to 450 million consumers with 285 billion transactions, dedicated towards the purchase of physical goods (typically gifts and books) and services other than mobile content on- demand/digital goods (such as music, tickets and games). mMoneyTransfer is expected to generate more than $200 billion in 2013.
Highlights from the report include:

• Global annual gross transaction value will grow over 5 times by 2013

• The ticketing segment will be driven by consumer usage on rail, air and bus networks as well as sports and entertainment events This will represent over 40% of the global transaction value by 2013

• The top 2 regions (Far East and W. Europe) will represent over 60% of the $300bn p.a. global mobile payment gross transaction value by 2013 for digital and physical goods. Western Europe is currently dominated by digital goods and services sold via SMS, whereas the Far East & China region (specifically Japan) is already well established in physical goods sales over the mobile web, and has been for a number of years.

Informa estimates that by 2013 more than 10 percent of all mobiles in use will be NFC- enabled, technology support to receive NFC payment will be common, and these factors should facilitate close to 180 million users to pay restaurant bills, buy tickets, pay toll fees, and buy groceries, apparel and home equipment.

In 2008, only 67 million mobile phone users accessed mBanking services, whereas in 2013 the figure could reach one billion.
Amongst banks, mobile manufacturers and technology vendors, the buzz about Mobile payments is discernable. Recently Visa (the world’s largest electronic payments network), demonstrated its mobile payment solution at Dubai. With a network across 170 countries, it will not be too long before Visa takes the mobile payments technology to the mass.
The stumbling block in large scale adaption would do with threat perception of transaction security. An NFC survey by ABI research indicates the transaction security to be the concern amongst users. It is only a little time and the convenience factor, which will sway the users towards use of the m-Payment platform. 
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